Nissan Poised to Sell Green-Vehicle Credits Tesla Started

Nissan Motor Co. says it may sell credits earned in the past two years from its battery-powered Leaf, the best-selling all-electric car in the U.S. Photographer: Jin Lee/Bloomberg

May 30 (Bloomberg) -- A new front is opening in the
emerging market for electric vehicles -- not for selling cars,
but for credits required to meet clean-air rules.

Starting this year, California is requiring the biggest
automakers to sell increasing numbers of “zero-emission
vehicles,” or ZEVs, such as pure-electric, plug-in hybrid and
hydrogen-powered autos. Companies that fail to meet their quotas
have the option of buying ZEV credits from rivals that exceed
their targets.

Nissan Motor Co. says it may sell credits earned in the
past two years from its battery-powered Leaf, the best-selling
all-electric car in the U.S.

“We are in a fortunate position of having positive credit,
so that’s obviously something we are able to look at,” Andy
Palmer, an executive vice president, said yesterday at the
carmaker’s headquarters in Yokohama, Japan. “We are exploring
some plans, but we haven’t announced anything yet.”

Tesla Motors Inc., the startup led by billionaire Elon Musk,
revealed in a June 2010 filing that it had sold credits to Honda
Motor Co. and another automaker it didn’t identify. Tesla didn’t
disclose the number of credits sold or the price.

The regulations affect auto sales in 11 other states --
including New York, New Jersey, and Massachusetts -- that follow
California’s rules. Regulators expect the six largest carmakers
to sell a combined 60,000 zero-emission autos in those 12 states
through 2014, and a cumulative total of 1.4 million by 2025.

Automakers earn credits for electric and plug-in hybrid
vehicles sold in those states to meet thresholds based on their
sales in California. Failure to get enough credits can lead to
fines or even limits on their ability to sell cars.

California Rules

“This is a way to address California’s unique air-quality
issues and reduce greenhouse-gas emissions,” said Dave Clegern,
a spokesman for the California Air Resources Board, which runs
the ZEV program. “We think there’ll be growing demand for the
vehicles and it’s a framework to get them to customers.”

The burden is heaviest for Toyota, which has the largest
market share in California, followed by Honda, Ford Motor Co.,
General Motors Co., Nissan and Chrysler Group LLC.

Nissan, Tesla

Credit prices and sales are negotiated between the seller
and buyer, and there’s no requirement by California to disclose
them, Clegern said. While Tesla and other companies declined to
say what a credit might be worth, each one can help an automaker
avoid thousands of dollars in fines.

The number of credits per vehicle depends on its range and
how fast the battery can be recharged. A model with a 100-mile
range and standard charging, such as a Nissan Leaf or electric
Ford Focus, would generate three credits, while a long-range,
fast-charging Tesla Model S can get seven.

Tesla received more than $13 million for credits
transferred to Honda and other manufacturers, the company’s
filings show.

“We have credits to sell to companies that may need them,
and we’re not going to identify them” beyond Honda, said
Diarmuid O’Connell, vice president of business development for
Tesla.

Durable Credits

Companies with ZEV credits to spare may be eager to sell
them. Credits earned from 2009 through 2011 begin to lose value
after three years, while those earned from 2012 onward don’t
expire and can be saved for future use, encouraging carmakers to
deliver more ZEV-compliant models than required under each phase
of the program, Clegern said.

“Some manufacturers who maybe aren’t getting their ZEV
into the market as early as others will be looking for credits
if they can find them,” said James Lyons, an analyst at Sierra
Research Inc. in Sacramento, California.

Honda, Chrysler

While Honda’s vehicle line ranks among the most fuel-efficient in the U.S., the Tokyo company faced a credit
shortfall in California because it sold fewer FCX Clarity fuel-cell sedans than it planned. Honda bought Tesla credits from
2008 to 2010 to ensure it avoided fines.

No further such purchases are planned, the company said.
Honda expects to begin delivering all-electric Fit small cars in
California late this year, and it’s adding a plug-in version of
its Accord sedan.

Chrysler may also need to purchase credits. The third-largest U.S. automaker has the most truck-heavy lineup, lags
behind others in selling cars with alternative powertrains, and
has been gaining share in California’s auto market.

Chrysler isn’t “wedded” to pure electric vehicles like
Nissan is and probably won’t invest heavily in a costly program
similar to Leaf, said Larry Dominique, executive vice president
of TrueCar.com.

“Chrysler’s got some great momentum and some new products
coming down the pipe,” said Dominique, a former head of
Nissan’s North American product planning. “They probably have
been focusing on product, dealers and marketing and said to
themselves: ‘We’ll worry about those mandates when we have
to.”’

Most of the credits Chrysler held as of October 2011, the
last reporting period, came from a unit that made low-speed
electric cars and was sold last year to Polaris Industries Inc.

Electric Fiat

Chrysler, majority owned by Italian automaker Fiat SpA,
starts production late this year of an electric version of the
small Fiat 500, said Tim Kuniskis, president of the brand for
North America. He declined to provide details of the vehicle or
a volume target.

“We’re in full compliance right now, and we know exactly
how many battery-electric vehicles we need to sell” to meet
California’s standards, Kuniskis said. “Our plan that we’re
building right now will keep us in full compliance.”

California requires automakers selling 20,000 or more
vehicles in the state annually to ensure that more than 15
percent of their vehicles release no emissions by 2025.

Compliance Costs

Starting in 2018, the requirements that now apply to the
six largest carmakers, all from the U.S. and Japan, will widen
to the top 12, to include Korea’s Hyundai Motor Co. and Kia
Motors Corp., Germany’s Daimler AG, Volkswagen AG and Bayerische
Motoren Werke AG, and Japan’s Mazda Motor Corp.

“The real $64,000 question at this point is whether or not
zero-emission vehicles are going to be commercially viable,”
said Lyons, the Sierra Research analyst, who was a California
state air-quality engineer. “More are getting sold now than
have in the past, however it’s still a far cry from the levels
at which the regulations will require them to be sold.”